Flora Growth Corp. Forms Joint Venture with Althea Group Holdings to Create Leading Beverages Brand in U.S. Market

Rhea-AI Summary

Flora Growth Corp. (NASDAQ: FLGC) has partnered with Althea Group Holdings (ASX: AGH) to form Peak USA JV , a 50/50 joint venture targeting the U.S. cannabis-infused beverages market. Each company contributed $250,000 in operating capital to Peak USA. This collaboration merges Flora's expertise in brand development and sales with Althea's advanced cannabis beverage processing capabilities. The U.S. cannabis beverages segment currently represents 1% to 3% of the market, indicating significant growth potential. With cannabis overtaking alcohol in daily use among first-time users, the joint venture aims to offer a compelling alternative to alcohol. Peak USA will navigate regulatory challenges and leverage combined strengths to establish a strong market presence and drive mutual growth.

Positive

• Flora Growth and Althea each invested $250,000, showing a solid financial commitment.
• Joint venture leverages Flora's U.S. CPG team and Althea's cannabis beverage processing expertise.
• Peak USA aims to capture a share of the growing U.S. cannabis beverages market, which is projected to reach half a billion dollars by 2030.
• Flora has a strong e-commerce platform with over 350,000 customers, enhancing distribution capabilities.
• The partnership aims to create a leading national brand in cannabis-infused beverages, benefiting from a shift in consumer preferences away from alcohol.

Negative

• The U.S. cannabis beverages market currently holds only a 1% to 3% market share, indicating a smaller starting market.
• Initial financial contributions are modest, totaling $500,000, which might limit the venture's immediate scale.
• Navigating regulatory challenges in the U.S. market can be complex and time-consuming, potentially delaying market entry.
• The success of the venture is highly dependent on the acceptance and growth of cannabis beverages, which still represent a niche market.

Market Research Analyst

Flora Growth Corp. and Althea Group Holdings have teamed up to enter the U.S. market for cannabis-infused beverages, a segment that is still relatively underdeveloped but shows significant potential. According to Headset Data, this market currently constitutes only 1 to 3 of the U.S. cannabis industry, which suggests ample room for growth.

The joint venture, Peak USA, brings together Flora's expertise in brand launching and Althea's know-how in cannabis-infused beverage production. Althea's Peak Processing Solutions already holds a substantial 40 market share in Canada, giving this venture a solid foundation.

One key insight for retail investors is that consumer behavior is shifting; daily or near-daily cannabis use is now more prevalent than similar levels of alcohol consumption. This underpins the potential demand for cannabis-infused beverages as an alternative to alcohol. The U.S. cannabis beverage market is projected to grow to $500 million by 2030, expanding at a CAGR of 14.7, implying a substantial growth trajectory for Peak USA.

The challenge lies in navigating the complex and varying regulatory environment across different states. Success will depend on how well Peak USA can handle these challenges while scaling its operations and distribution networks efficiently.

Financial Analyst

From a financial perspective, the joint venture between Flora and Althea is a strategic move aimed at capturing a slice of the emerging cannabis-infused beverage market. With each company contributing $250,000 in operating capital, the initial investment appears modest, minimizing financial risk while allowing both parties to leverage their respective strengths.

Flora's established e-commerce platform, boasting over 350,000 customers, provides a ready-made distribution channel that can accelerate market entry and revenue generation. Investing in a growing segment like cannabis beverages, which has a projected CAGR of 14.7, aligns with Flora's broader strategy to diversify revenue streams and capitalize on new growth avenues.

However, investors should be mindful of the competitive landscape and regulatory hurdles that could impact the speed and extent of market penetration. While the U.S. cannabis market offers substantial growth potential, actual performance will depend on how effectively Peak USA can capture market share and navigate regulatory complexities.

• Flora and Althea have established Peak USA JV LLC ("Peak USA") - a 50/50 joint venture aiming to capitalize on the beverages market. Each party to the joint venture contributed $250,000 of operating capital.
• Peak USA will link Flora's U.S.-based CPG team with Althea's Peak Processing Solutions ("Peak"), which is a recognized market leader in cannabis-infused beverages. Peak has a 40% market share in Canada.
• Peak USA will combine Flora's brand-launching expertise with Althea's processing experience to produce the next generation of beverages for the U.S. market.
• According to Headset Data, the beverage market segment currently represents only 1% to 3% of the U.S. cannabis market. First-time daily cannabis use overtook alcohol, with roughly 17.7 million users compared to 14.7 million for alcohol.

Fort Lauderdale, Florida--(Newsfile Corp. - June 4, 2024) - Flora Growth Corp. (NASDAQ: FLGC) ("Flora" or the "Company") has formed a joint venture with Althea Group Holdings (ASX: AGH) ("Althea") to enter the hemp-derived beverage market.

"Aligning with Althea instantly bolsters our credibility within the beverage sector. Their very special, world-class emulsion technology has established the very foundation of this category. Coupled with our expertise in brand development, sales, and marketing, this partnership will position us as a frontrunner in the market, setting a standard that competitors will find challenging to emulate. Our focus lies not solely on cannabis but on providing an alternative to alcohol. Our objective is to establish a nation-wide brand," said Clifford Starke, Chief Executive Officer.

The partnership is strategically positioned to establish cannabis beverages distribution in the U.S. by adeptly handling regulations and facilitating market access via CPG channels like wine and liquor stores.

The joint venture will leverage the strengths and resources of both Peak and Flora to capitalize on current commercial opportunities in the beverage market in the U.S., driving mutual growth and success. Peak contributes production know-how, while Flora brings a wealth of brand launching, sales and marketing expertise within the dynamic landscape of lifestyle brands in the U.S. Flora has introduced some of best-selling gummies, edibles, vapes and accessories in the U.S. through its e-commerce platform of over 350,000 customers and a robust business-to-business distribution network.

Althea's Peak estimates that it produces close to 40% of all cannabis beverages available in Canada. Cannabis-infused beverages are a rapidly growing product category within the cannabis industry and currently represents 2.1% of the Canadian adult-use cannabis market, which equates to approximately CAD$134.4 million.

According to Headset Data, beverages still represent only about 1% to 3% of the U.S. cannabis market with plenty of room for further growth. Beverages also benefit from the fact that people are seeking an alternative to alcohol alternative. Data Bridge Market Research estimates that the U.S. infused beverages market is expected to reach half a billion by 2030, at a CAGR of 14.7% during the forecast period.

According to data analyzed by Carnegie Mellon University, daily or near-daily cannabis use is now more common than similar levels of alcohol consumption in the U.S. First-time daily cannabis use overtook alcohol, with roughly 17.7 million users compared to 14.7 million for alcohol.

"Today's milestone in the establishment of our joint venture with Flora is testament to Althea's relentless dedication to innovation and growth. As we embark on this strategic venture, we are unwavering in our commitment to delivering excellence in the rapidly evolving cannabis beverages market in the U.S. With our combined expertise and shared vision, we are poised to drive success and create lasting value for our stakeholders," said Joshua Fegan, Althea's Chief Executive Officer and Managing Director.

About Althea Group Holdings Limited.

Althea Group Holdings Ltd is a global leader in the manufacturing, sales and distribution of cannabis-based medicines and recreational cannabis products. Althea services these sectors via two distinct business units. Althea, the company's pharmaceutical business, offers a comprehensive range of cannabis-based medicines which are made available to patients via prescription. Peak Processing Solutions, Althea's recreational cannabis business, produces legal cannabis products purchased by adult consumers in retail stores.

To learn more about Althea Group Holdings, please visit: www.altheagroupholdings.com

For more information on Althea, please visit: www.althea.life

For more information on MyAccess Clinics, please visit: www.myaccessclinics.co.uk

For more information on Peak, please visit: www.peakprocessing.com

About Flora Growth Corp.

Flora Growth Corp. is a consumer-packaged goods leader and pharmaceutical distributor serving all 50 states and 28 countries with 20,000+ points of distribution around the world. For more information on Flora, visit www.floragrowth.com.

https://justcbdstore.com/

https://www.vesselbrand.com/

https://justcbdstore.uk/

https://www.phatebo.de/home-en

Investor Relations:

Investor Relations ir@floragrowth.com

Clifford Starke Clifford.Starke@floragrowth.com

Media:

media@floragrowth.com

Cautionary Statement Concerning Forward-Looking Statements

This press release contains "forward-looking statements," as defined by U.S. federal securities laws. Forward-looking statements reflect Flora's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements about: the viability and success of a joint venture between the Company and Althea Group Holdings, Flora's ability to benefit from the beverages sector, the growth projections of the beverages space, including but not limited to revenues, CAGR and market share, the introduction of new beverages to the U.S. market, the replication of Peak's business processing capabilities and success in the U.S., the growth of Flora's financial performance measures due to beverages, Flora's e-commerce and distribution network selling beverages successfully or at all, the utilization of the proprietary cannabis emulsion Envision™ in the U.S. market, and the impact of new product launches and partnerships. Such forward-looking statements are subject to various and risks and uncertainties, including those described under section entitled "Risk Factors" in Flora's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the "SEC") on March 28, 2024, as such factors may be updated from time to time in Flora's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov/edgar. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Flora's filings with the SEC. While forward-looking statements reflect Flora's good faith beliefs, they are not guarantees of future performance. Flora disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based on information currently available to Flora (or to third parties making the forward-looking statements).

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/211638

FAQ

What is Flora Growth Corp.'s joint venture with Althea Group Holdings?

Flora Growth Corp. has partnered with Althea Group Holdings to form Peak USA JV , a joint venture focused on the U.S. cannabis-infused beverages market.

How much capital did Flora and Althea contribute to the joint venture?

Each company contributed $250,000 in operating capital to the joint venture, Peak USA JV

What market share does cannabis-infused beverages hold in the U.S.?

Cannabis-infused beverages currently hold a 1% to 3% market share in the U.S. cannabis market.

What are the growth prospects for the U.S. cannabis-infused beverages market?

The U.S. cannabis-infused beverages market is expected to reach half a billion dollars by 2030, with a CAGR of 14.7%.

What expertise does Flora bring to the joint venture with Althea?

Flora brings expertise in brand development, sales, and marketing within the U.S. lifestyle brands market.

What role does Althea Group Holdings play in the joint venture with Flora Growth?

Althea contributes its advanced cannabis beverage processing capabilities, leveraging its 40% market share in Canada.

What is the strategic aim of the Flora and Althea joint venture?

The joint venture aims to capitalize on the U.S. cannabis-infused beverages market, offering an alternative to alcohol and establishing a strong national brand.

How does the joint venture plan to navigate U.S. market regulations?

Peak USA will adeptly handle U.S. regulations and facilitate market access via CPG channels like wine and liquor stores.